Interim Short-Term Financing

The point of entrée for vendor financing sometimes arises through consulting engineers.

Initially, Municipal Utility District 418 in Harris County, Texas, was going to meet the needs of a planned community by building a 0.6-mgd secondary activated sludge treatment plant. But at $8 million, the lowest bid was too costly for an operation with an annual operating budget of $950,000.

The district's consulting engineer asked AUC Group L.P. of Houston to think of other ways to expand treatment capacity. Though the company's equipment hadn't been included in the $8 million bid, Brown & Gay Engineers Inc. of Houston knew through other projects that AUC Group leases interim facilities, provides financing for permanent treatment plants, and owns an inventory of portable, modular treatment components that can be assembled in stages.

The company suggested the developer lease a temporary facility and phase construction to time expenses to flow requirements. The five-year lease will cost The Howard Hughes Corp. $234,000/year for a total investment of less than $2 million.

“The parent holding company was able to direct savings from this project to other capital projects to continue to maintain overall development in the initial growth phases of the development,” says Project/Construction Engineer Christopher Gilbert, PE.

When the lease expires, the developer can extend it, convert it to an ownership arrangement, or terminate it and convert to a different, permanent treatment solution.